Gold Substitution: Bitcoin Takes the Lead, Says Cathie Wood

After the introduction of spot Bitcoin exchange-traded funds (ETFs), investors are shifting their focus from gold to Bitcoin (BTC), according to ARK Invest’s CEO. Cathie Woods, CEO of ARK Invest, mentioned in a conversation with chief futurist Brett Winton on the company’s YouTube channel that there has been a substitution into Bitcoin from gold due to its rising value and the easier accessibility provided by the new ETFs. Woods believes that Bitcoin, like gold, will prove itself as a “risk off asset” during times of weakness in the banking sector. She cited an example from March 2023 when Bitcoin’s price surged by 40% during a regional bank crisis in the United States.

A recent analysis by Fidelity revealed that Bitcoin’s correlation with gold increased in 2023, breaking away from its previously inverse relationship with interest rates. The one-year rolling correlation between Bitcoin and gold currently stands at 0.80, the highest it has ever been. Despite its correlation with gold, Wood was not surprised by the price correction that occurred after the launch of the spot Bitcoin ETFs. She had predicted that the launch would result in a “sell on the news” event. She noted that a significant portion of Bitcoin holders (15 million out of 19.5 million) have not moved their Bitcoin in 155 days, suggesting a long-term outlook.

In January 2022, ARK Invest was one of the 10 companies that launched a spot Bitcoin ETF called the ARK 21Shares Bitcoin ETF. At the end of last week’s trading hours, the ARK 21Shares ETF held $705.8 million worth of Bitcoin, making it one of the largest holders of the cryptocurrency. Only Grayscale’s GBTC, BlackRock’s IBIT, and Fidelity’s FBTC products hold more Bitcoin. ARK Invest has been actively investing in Coinbase stock (COIN) since February 2022, currently holding 7.187 million shares worth $843 million across multiple ETFs. The firm has been selling COIN shares consistently since June 7, reducing its holdings from 11.43 million shares.